Northland Resources (NAU.TO) announced an update on their 100% owned Kaunisvaara iron ore project in Sweden.

The company reaffirms its projected timeline and guidance for 2013 and 2014. Northland still expects to start their mining operations this month and ship a first load of iron ore in Q1 2013. As Northland plans to produce 1.3Mt of iron ore with a Fe-content of 69%, we estimate operational cash flow to come in around $30M next year, increasing to $80M in 2014 and $100M from 2015 on, based on a $110/t 62%Fe benchmark price (the current iron ore price is approximately $120/t).

We expect a re-rating of the share price once Northland has proven to possess the needed operational expertise and starts to ramp up their production towards the expected full capacity of 4Mtpa from Q3 2014 on.

Although Northland’s share price has increased from C$0.62 to the current share price of C$0.82 since our first alert in August, we remain confident the company can break through the one-dollar barrier sometime next year.

Disclosure: The author holds a long position in Northland Resources SA. Please see our disclaimer for current positions.

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